Friday, May 6, 2016

Zimbabwe Getting back In the Money Printing Business

The government pretty much destroyed the agricultural sector with the farm confiscations (and the ongoing murders of the farmers) so the country has to import food when it was once one of the breadbaskets of Africa.
Having to import the basics plays hell with with your foreign currency reserves.

From the International Business Times:

Zimbabwe To Print Its Own US Dollars Amid Severe Cash Shortage And Deepening Economic Woes

Zimbabwe will print its own version of the U.S. dollar, as an ailing
economy fuels a severe cash shortage in the southern African nation.
John Mangudya, Zimbabwe’s central bank governor, said Thursday the
so-called bond notes will be backed by $200 million in support from the
Africa Export-Import Bank, according to the Herald, a local
government-owned newspaper.

“It is not an overnight process,” Mangudya told
the Herald when asked what date the bond notes will be issued. “We are
still working on a design which will be sent for printing outside the
country. The notes will not be introduced immediately but probably
within the next two months.”

The specially designed dollar notes
will come in denominations of two, five, 10 and 20. They will also have
the same value as their U.S. dollar equivalents. The bond notes are an
extension of so-called bond coins of one, five, 10 and 25 cents which
the central bank introduced in 2014 and are pegged to the value of the
U.S. dollar.

The central bank governor stressed the introduction of the bond notes
does not signal the return of the defunct Zimbabwean dollar, which the
country ditched in 2009 amid sustained hyperinflation.

Residents have
since been using the U.S. dollar as well as several other foreign
currencies, including the South African rand and the Chinese yuan. To
curb the U.S. dollar shortage, Mangudya also set a $1,000 limit on how
much cash can be taken out of the country and encouraged residents to
use the rand since South Africa is Zimbabwe’s top trading partner, BBC News reported.

The
rand, however, has suffered from the brunt of a general sell-off in
riskier assets amid fears of a global economic slowdown at a time when
South Africa’s own economy is also struggling to grow. Ratings agencies
have threatened possible downgrades should the South African government
show a lack of commitment to cutting its budget deficit, Reuters reported....MORE